Overtime pay counts towards statutory holiday pay

Overtime pay counts towards statutory holiday pay

A new ruling which could affect all UK employers and employees may well impact on the holiday pay entitlement you pay to your domestic staff.

The Employment Appeals Tribunal has ruled that the following affects ALL UK employers and employees:  that normal overtime remuneration in addition to basic salary payment is to be included when calculating statutory holiday pay entitlement.

Under the ruling, employers are only required to include overtime payments during the statutory four weeks of holiday pay entitlement, as laid down in the EU Working Time Regulations, and not the additional 1.6 weeks of holiday time as specified in the UK’s Working Time Regulations.  Additional discretionary holiday is also excluded.

Such claims for higher holiday payments can be backdated; however there are time-related criteria, with exceptions if it is not practical for the employee to make the claim in time.

It is easy to see that the potential impact for employers could well be substantial to the extent that Vince Cable, the business secretary, announced just hours after the decision that he is setting up a new taskforce to assess the impact of the ruling and ways to “limit the impact on business”.

The impact on those of us who employ domestic staff will probably be limited or indeed have no impact at all.  But if your domestic staff have regularly worked overtime as part of the normal work routine, and you have only used the basic salary to calculate holiday pay, you may well need to take expert advice.